California Gas Company Should Pay $2.25 Billion for 2010 Explosion

State and local authorities have provided a recommendation to the California Public Utilities Commission that PG&E Corp. (NYSE: PCG) should pay $2.25 billion for a natural gas pipeline explosion in September 2010 that killed eight people and damaged or destroyed more than 100 homes in San Bruno, a city just south of San Francisco. The state investigators and San Bruno officials disagree, however, on how the PG&E payment should be directed.

The officials do agree that the payment should include the $1 billion that the Public Utilities Commission already has ordered the company to pay to overhaul its pipelines. The state wants to allow PG&E to pay the $1.25 billion to improve the safety of the rest of the company's pipeline system. San Bruno officials want the $1.25 billion to be paid to into the state's general fund as a fine.

The company, of course, chafes at the size of the payment, regardless of where the money ends up. Perhaps that is because it has set aside only $200 million to pay for possible penalties.

PG&E's CEO said yesterday that the company already has paid out more than $1.5 billion in pipeline-related costs since the 2010 blast. The company, which has publicly acknowledged blame for the explosion, denies in court filings that it failed to follow regulatory and safety requirements.

The California Public Utilities Commission may follow either the state or the local recommendation, or it may prepare one of its own. No date for a ruling has been set.

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